ITAD Ruling No. 151-05

December 1, 2005 ITAD RULING NO. 151-05 Articles 34 of the Vienna Convention on Diplomatic Relations; Sec. 106 & 108 of the National Internal Revenue Code of 1997; BIR Ruling No. ITAD-10-04 Embassy of the Union of Myanmar 8th Floor, Xanland Centre 152 Amorsolo Street Legaspi Village, Makati City Gentlemen : This refers to your Note No. 268 dated October 21, 2005, endorsed to this Office by the Department of Foreign Affairs, requesting for issuance of the Value-Added Tax Exemption Certificates (VEC) to the Embassy and its officials for any functions they may undertake, be it sale, purchase and importation of goods and services in the Philippines. In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which reads: "ARTICLE 34 A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of a member of a Diplomatic Mission does not include exemption from value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by that Diplomatic Mission of goods and/or services shall be subject to the value-added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. It is clear from the above that Diplomatic Missions are entitled to exemption from direct taxes as provided under Article 34 of the Vienna Convention on Diplomatic Regulations. As regards to indirect taxes, this Office may grant VAT exemption based on reciprocity to the Embassy and its members on their local purchases of goods and/or services in the Philippines. However, applying the principle of reciprocity, this Office may grant VAT exemption to the Embassy of the Union of Myanmar and/or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of October 17, 2005 that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchases of goods and services in your country. HEIcDT Hence, the Embassy of the Union Myanmar is exempt from value-added tax on its purchases of local goods and/or services. (BIR Ruling No. DA-ITAD-10-04 dated February 16, 2004) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service